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CMA
September 27, 2019  

Mortgage REIT Start-Up Mapping Debut CLO

A new mortgage REIT is preparing to enter the fast-growing commercial real estate CLO market.

MF1 REIT, which finances multi-family properties, was formed last year by Limekiln Real Estate and Berkshire Residential Investments. It is expected to hit the market next month with a roughly $500 million offering led by J.P. Morgan.

MF1 will be the third debut CLO issuer in 2019, following DoubleLine Capital and Starwood Property. So far this year, 19 shops have priced deals, matching the total in full-year 2018, and commercial real estate CLO issuance has already surpassed last year’s volume.

MF1 originates bridge and mezzanine loans on apartment properties, including senior housing, student housing and mobile-home parks. It has a strategic alliance with CBRE, which sources and services loans for the REIT.

New York-based Limekiln has been expanding its staff this year to handle ramped-up activity at the REIT, including hires in New York and Oakland.

Limekiln is run by Scott Waynebern, a commercial real estate veteran whose resume includes stops at Deutsche Bank and Benefit Street Partners. He spent 15 years at Deutsche, where he was head of real estate capital markets and trading for many years and later oversaw commercial real estate special situations. After leaving in 2010, he formed Limekiln, which advised New York-based Related Cos. on investments in commercial real estate debt. In 2013, Limekiln was put on hold when he joined Benefit Street to launch its commercial real estate platform. After leaving that company in mid-2017, he revived Limekiln.

Berkshire, a Boston investment manager, operates equity and debt funds that invest in the multi-family sector.

MF1 conducted its first securitization in July, when it packaged $562.9 million of multi-family loans that it had originated or co-originated. The deal, underwritten by Amherst Pierpont Securities and Deutsche, was floated via Freddie Mac’s Q series (MF1 2019-Q009). Q deals are backed by mortgages that Freddie didn’t underwrite at the time of origination. Freddie wraps the resulting bonds with its guarantee.

MF1’s deal was the first in the series in which Freddie didn’t guarantee all the bonds. The transaction included two unguaranteed and unrated subordinate classes that accounted for 20% of the total bonds: the $42.2 million Class B and the $70.4 million Class C. MF1 retained Class C and placed Class B with a third party.